What Triggered the Rally: First Data Corp (NYSE: FDC) stock surged 21.03% on 16th January 2019 (Source: Google finance) after the company will be combining with a company called Fiserv, as the companies’ boards of directors have unanimously approved a definitive merger agreement for $22 billion. Under the terms of the agreement, First Data Corp. shareholders will receive a fixed exchange ratio of 0.303 Fiserv shares for each share of First Data Corp. common stock they own. The deal marks a bigger push into payment processing for Fiserv, which is based in Brookfield, Wisconsin, and helps thousands of regional banks offer bill-paying and electronic payments services, in addition to handling the back-office functions of credit and debit card transactions. The firm also helps banks implement Zelle, major lenders’ answer to PayPal Holdings Inc.’s popular Venmo, after Fiserv’s own offering, Popmoney, struggled to take off.
Deal Metrics: Further, the deal will create the world’s largest payment processor amid a wave of consolidation in that industry, which faces threats from startups such as Square Inc. and Adyen NV. The all-stock transaction values First Data at a 29 percent premium to Tuesday’s closing price.
The merger is the latest twist for one of the biggest take-private deals. KKR & Co. purchased First Data in a 2007 leveraged buyout, right before markets tanked. It brought in former JPMorgan Chase & Co. executive Frank Bisignano as its chief in 2013, and returned to the public markets in 2015. KKR is supporting the deal and will own 16 percent of the combined company.
The deal is a boost for Bisignano, who had struggled to gain traction in First Data’s turnaround while grappling with a heavy debt load brought on by the KKR buyout. Bisignano will become chief operating officer of the combined company, which will be led by Fiserv Chief Executive Officer Jeffery Yabuki.
Fiserv also released preliminary fourth quarter earning alongside the First Data takeover proposal, indicating it sees full-year GAAP revenues of $5.82 billion, including $1.55 billion for the final three months of the year.
Fourth quarter operating earnings were pegged at around 71 or 72 cents per share, down 43% from the same period last year, but largely in-line with the Street’s consensus forecast. Full year earnings are likely to be stable at $2.87 to $288 per share, modestly ahead of estimates once tax benefits of around 28 cents per share are backed out.
First Data expects to report a 5% increase in fourth quarter segment revenue of $2.185 billion, and total full year sales of $9.5 billion.